SFC Imposes 1 Billion KRW Fine on Former AST CEO: "Highest Individual Fine Ever"

The Securities and Futures Commission (SFC), under the Financial Services Commission, has imposed a fine of approximately 1 billion KRW on the former CEO of Kosdaq-listed company AST for inflating inventory assets, engaging in accounting fraud, and concealing these actions.

On July 11, at its first extraordinary meeting, the SFC resolved to impose a fine of 1.02 billion KRW on the former CEO of AST, and a total of 1.22 billion KRW on four other company officials, including the former chief financial officer.

The SFC pointed out that AST’s former management was aware of the overstatement of inventory assets but condoned it and did not revise the financial statements. Furthermore, the former management instructed the submission of falsified inventory records to the external auditor of the subsidiary, in an organized effort to conceal the overstatement and obstruct normal external auditing procedures.

The SFC explained, “The former CEO, who knowingly concealed false disclosures in the financial statements for an extended period and thereby increased investor losses, has been given the highest individual fine ever imposed since the introduction of fines under the Act on External Audit of Stock Companies.”

In addition, accounting firms Samduk, Sinhwa, and Daejoo, which served as AST’s auditors from 2017 to 2022, were subject to sanctions such as restrictions on audit activities and fines, due to negligence in audit procedures.

However, the SFC decided to exempt AST from listing management measures. This decision was based on the fact that in 2023, the largest shareholder changed to Union Asset Management and key management personnel were replaced, leading to a process of management normalization. The “Exemption from Listing Management Measures” system was introduced in June last year, and AST has become the first case to which this system is applied.

The SFC also resolved to impose fines on Kosdaq-listed company SOOP (formerly AfreecaTV). The company was fined 1.48 billion KRW, and both the former CEO and the responsible executive were fined 30 million KRW each, bringing the total fine to 1.54 billion KRW.

SOOP acts as an agent arranging game content advertising for individual broadcasts. Despite being required to recognize only the agency commission as revenue after paying advertising fees to streamers, SOOP recognized the entire advertising fee as revenue, thereby overstating its operating profit for 2021 and 2022.